Trapped in 'Vicious Circle,' Greece Passes Crushing New Austerity Package

Amid protests and strikes, Greek lawmakers passed a crushing new austerity package early on Monday.

The reform package, which passed by a razor-thin margin, was described as "the toughest...the thrice bailed-out nation has been forced to enact since its debt crisis began," according to the Guardian.

The austerity measures represent EUR5.4 billion ($6.2 billion) in savings and would reduce Greece's pension payouts while raising taxes. The so-called "Troika" of international creditors--the European Commission, the International Monetary Fund (IMF), and the European Central Bank--are demanding such painful reforms in return for an EUR86 billion bailout agreed to last July in a bid to pull Greece out of its debt crisis.

Reutersreports:

During the debate, opposition parties argued pension cuts and tax hikes would prove recessionary, dealing another blow to a population fatigued by years of austerity.

"The measures will be a tombstone for growth prospects," said Kyriakos Mitsotakis, leader of the conservative New Democracy party which leads in opinion polls.

In fact, wroteGuardian economics editor Larry Elliot on Sunday: "Greece is being set budgetary targets that the IMF knows are unrealistic and is being set up to fail. It will then be punished further for being unable to do what was impossible in the first place."

While Parliament debated the measures inside, Greek citizens expressed their anger in the streets. Police said almost 18,000 people turned up in Athens and about 8,000 in Thessaloniki on Sunday, following additional protests on Saturday.

"Every day they destroy our country a little more," Vassilis Papadopoulos, a young waiter, said to the Guardian of the international creditors one might argue they'd be better off without.

Indeed, "months of callous inaction have pushed the mood in Greek society into a dangerous place," wrote journalist Paul Mason on Monday. "A population that, two years ago, started demanding and giving printed receipts as an act of collective moral renewal, has given up on them once again. The most popular graffiti tag has become 'all this political shit'."

Mason continued:

Syriza, although it governs, is substantially hollowed out as a political force. Although its leaders are still prepared to say, "We do austerity under protest," they no longer so often complete the thought "... and it will not work."

With a vacuum on the left, what has broken through in Greece is pessimism, cynicism and economic nationalism, pooled with large amounts of suppressed anger. "Being held incommunicado in a cell drives you mad quicker than knowing you're going to be executed," is how they put it in the coffee bars of Athens.

Tsipras has spent so long seeking closure with Greece's lenders that, should he achieve a debt deal by June, it may feel like victory. But unless he finds a way to rebuild the left as a combined political and social movement, it will be hollow.

The Parliament's vote came ahead of a meeting on Monday of European finance ministers to discuss Greece's debt problems--a meeting painted as a fight between the IMF, which is calling for debt relief, and Germany, which opposes any debt forgiveness.

"Tomorrow is a very important day. After six whole years, during which European institutions have been meeting constantly to discuss the Greek (financial) crisis and have only considered austerity measures, tomorrow, the Eurogroup will also discuss Greek debt relief," Greek Prime Minister Alexis Tsipras said on Sunday.

According to the Guardian, Tsipras "won unexpected support at the weekend from Germany's vice-chancellor, Sigmar Gabriel. In a statement to Reuters, Sigmar, who is also the economy minister, insisted debt relief was now the only way of plucking Greece out of its seemingly endless economic death spiral. 'The eurogroup meeting on Monday must find a way to break the vicious circle,' he wrote. 'Everyone knows that this debt relief will have to come at some point. It makes no sense to shirk from that time and time again'."

The BBC quoted the head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, as saying Monday's discussion was merely preliminary and that he hoped a deal with Greece would be finalized by May 24.

Speaking after the meeting, Greek finance minister Euclid Tsakalotos reportedly said, "the IMF wants more on debt relief than member states."

However, in a recent blog post, former Greek finance minister Yanis Varoufakis warned against giving the IMF too much credit for its seemingly reasonable stance.

"The IMF's austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society's weakest, and turbocharge the humanitarian crisis," Varoufakis wrote in April. "And it is unnecessary because meaningful growth is much more likely to return to Greece under our policy proposals to end austerity, target the oligarchy, and reform public administration (rather than attacking, again, the weak)."

He continued: "Abandoning the template in Greece would be to confess to the possibility that decades of anti-social programs imposed globally might have been inhuman and unnecessary."

As outside entities hold Greece's fate in their hands, Varoufakis argued, "[t]he result is a Europe more deeply immersed in disrepute and a Greek people watching from the sidelines an ugly brawl darkening their already bleak future."

A study released last week offered confirmation that the Troika's "bailout" packages delivered to Greece primarily served European banks rather than the Greek people.